Product Quality in Different Markets and Cost Structure
This paper analyzes the behavior of monopoly firm serving its products to two countries. The main focus of this paper is on how the product-quality choice in different markets are related with the cost structure of the firm. First, This paper examines the effects of production and R&D costs on the product quality separately, and then discusses the general case where the both costs exists. This paper shows that if only production costs exist, providing different levels of product quality is optimal and that if only R&D costs exist, providing the same level of quality is optimal. About the general case, this paper shows the conditions with which the same-quality strategy is optimal in terms of utility and other parameters. As an application, this paper discusses the firmâ€™s decision on entry in a foreign market either by exports or FDI. The result is consistent with observations in emerging economies.
|Date of creation:||Sep 2011|
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- Juan Carlos Hallak & Jagadeesh Sivadasan, 2009.
"Firms' Exporting Behavior under Quality Constraints,"
09-13, Center for Economic Studies, U.S. Census Bureau.
- Juan Carlos Hallak & Jagadeesh Sivadasan, 2009. "Firms' Exporting Behavior under Quality Constraints," NBER Working Papers 14928, National Bureau of Economic Research, Inc.
- Hallak, Juan Carlos & Sivadasan, Jagadeesh, 2011. "Firms' Exporting Behavior under Quality Constraints," Working Papers 628, Research Seminar in International Economics, University of Michigan.
- Juan Carlos Hallak & Jagadeesh Sivadasan, 2010. "Firms' Exporting Behavior under Quality Constraints," Working Papers 99, Universidad de San Andres, Departamento de Economia, revised Mar 2010.
- Rajat Acharyya, 2005. "Consumer Targeting Under Quality Competition In A Liberalized Vertically Differentiated Market," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 30(1), pages 129-150, June.
- George Symeonidis, 2002.
"Comparing Cournot and Bertrand Equilibria in a Differentiated Duopoly with Product R&D,"
Economics Discussion Papers
539, University of Essex, Department of Economics.
- Symeonidis, George, 2003. "Comparing Cournot and Bertrand equilibria in a differentiated duopoly with product R&D," International Journal of Industrial Organization, Elsevier, vol. 21(1), pages 39-55, January.
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